The plank reads,
Determined
to crush the double-digit inflation that was part of the Carter
Administration’s economic legacy, President Reagan, shortly after his
inauguration, established a commission to consider the feasibility of a
metallic basis for U.S. currency. The commission advised against such a move.
Now, three decades later, as we face the task of cleaning up the wreckage of
the current Administration’s policies, we propose a similar commission to
investigate possible ways to set a fixed value for the dollar.
While it is heartening to see the gold standard
becoming a mainstream issue once again, the purpose of the “gold plank” is
primarily political — to placate Ron Paul supporters — and it should not be
construed as anything more.
Why would the Republican Party leadership worry
about placating the supporters of a congressman whose presidential campaign was
soundly defeated?
Well, despite being outspent 100 to 1 by Mitt Romney
and being opposed by the entire GOP establishment, Ron Paul garnered two million
primary votes and collected nearly 200 delegates in the primaries and caucuses.
His message of small government, non-interventionism, constitutionalism, and
sound money resonated with a significant minority of Republican voters.
The Republican Party leadership fears that many of
Paul’s supporters are embittered by the shabby treatment their candidate
received at the state and local level and on the convention floor, and thus
will not support Romney in November.
While it is highly doubtful that Paul’s supporters
would vote for Obama, they could simply sit out the election — or worse,
organize a nationwide write-in campaign on behalf of Paul. Given that Paul
supporters have proven themselves adept at exploiting the Internet for
organization and fundraising, a write-in campaign could have the effect of a
third-party run.
The inclusion of the “gold plank” in the GOP
platform is an attempt by the party’s leadership to keep the “Paulistas” within
the Republican fold. Whether this ploy will work is anyone’s guess.
Looking beyond the upcoming election, we should ask
ourselves, what are the chances of the gold standard getting a serious
consideration?
I’d say they run anywhere from zero to nil.
Let’s deal with political reality. Neither the
Democrats nor the Republicans want to reduce the size of the federal
government. So, regardless of who wins this year’s presidential election,
Washington will be spending more, passing more laws, raising taxes, inflating,
and incurring more debt in 2013 and beyond.
Congress has run budget deficits in excess of a
trillion dollars for the last four years and has added $10 trillion to the
national debt in the last decade.
The US Treasury has relied on China’s central bank
to purchase a large chunk of that debt. But with China now selling Treasuries,
the Federal Reserve has been forced to pick up much of the slack by increasing
its debt purchases.
Now, in order for the Fed to continue monetizing
federal-government debt, it must continue to amass Treasuries. The Fed can only
do this by increasing the monetary base.
A restored gold standard or anything resembling it
would severely restrict the Fed’s ability to expand the money supply, which
would mean Congress could no longer rely on the Fed as the lender of last
resort. Under these circumstances, Congress would have to radically cut
spending, perhaps as much as 40 percent. There is no will on Capitol Hill to
impose spending cuts of that size.
The reason governments of all forms have
traditionally loathed the gold and other metallic standards is because of the
fiscal discipline they impose. As Ron Paul writes,
As
governments and central banks continue the cycle of spending and inflating, the
purchasing power of their currencies is constantly being degraded. These
currencies are what the people are working for and saving. This inflation guts
the savings and earnings of the people, who have very limited options for
protecting themselves against these ravages. One option is to convert their
fiat currency into something out of reach of central banks and government
spending, such as gold or silver.
It is
fairly typical in the midst of economic crises like these for gold to come
under attack from Keynesian economists and their amen corner in the media. The
arguments against gold are usually straw men, based on a fundamental
misunderstanding of the purpose of buying gold. Gold is not a typical
investment. It is a defense against the predictable behavior of governments to
debase a fiat currency under its absolute control. The people who run the
printing presses have trouble shutting them off. In order to limit one's
exposure to this reckless behavior, it is wise to exchange unsound assets for
sound ones.
As the
foundation of their power, their fiat currency, is rejected or avoided,
government power is compromised. Fiat currencies trade the people's freedom and
security for the government's freedom to squander the wealth of the nation on
wasteful pet programs, wars, and corruption. This is why the freedom of the
people is so intertwined with a sound monetary unit. This is also why the
founders liked gold and silver, and supporters of big government hate them.
A genuine gold standard would mean the government
relinquishing the power of the printing press and handing control of money back
to the people. With sound money jingling in their pockets, people could veto
the decisions of the central bank and rein in a spendthrift government by
simply demanding delivery of their gold.
That is too much economic democracy for the ruling
elites, who rely on coercive legal-tender laws and the inflationary
central-banking system to stay in power.
However, with the economy still mired in a deep
recession and the federal government confronted with increasing unfunded
liabilities, there is a very good chance the Fed will continue printing money
to provide more pork-filled “stimulus” and to pay for Uncle Sam’s gargantuan
debts.
This next round of inflation could spark a run
against the dollar and cause a worldwide panic to buy gold and silver. So we
could end up with a gold or other metallic standard after all.
About the author: Tim Kelly is a columnist and
policy advisor at the Future of Freedom Foundation in Fairfax, Virginia, a
correspondent for Radio Americas Special Investigator, and a political
cartoonist.
This article was published by the Future of Freedom Foundation.
No comments:
Post a Comment